Borr Drilling ((BORR)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Borr Drilling’s recent earnings call painted a picture of robust financial health, marked by notable revenue and EBITDA growth. The company demonstrated high utilization rates and successfully secured new contracts, contributing to a positive outlook. However, challenges such as delayed collections in Mexico and increased operating expenses were also highlighted, alongside uncertainties in Saudi operations. Overall, Borr Drilling remains optimistic about its financial position and strategic leadership transitions.
Strong Revenue and EBITDA Growth
Borr Drilling reported a significant increase in revenue, rising by $51.1 million or 24% to $267.7 million compared to the first quarter. This growth was accompanied by a 39% rise in EBITDA, reaching $133 million. These figures underscore the company’s strong financial performance and its ability to capitalize on market opportunities.
High Utilization Rates
The company achieved impressive utilization rates, with technical utilization at 99.6% and economic utilization at 97.8%. Out of 24 rigs, 22 were active, showcasing the company’s operational efficiency and capacity to maintain high levels of activity.
Significant Free Cash Flow Generation
Borr Drilling generated $106.5 million in free cash flow during the first six months of the year. This substantial cash flow generation is a testament to the company’s effective financial management and its ability to convert operational success into liquidity.
New Contracts and Future Coverage
The company secured 14 new contract commitments, adding $318 million to its backlog. With 84% fleet coverage at an average day rate of $145,000 for 2025, Borr Drilling has positioned itself well for future revenue streams and operational stability.
Financial Position Strengthened
Borr Drilling’s liquidity increased by $200 million, thanks to a $102.5 million equity raise and amendments to revolving credit facilities. This bolstered financial position provides the company with greater flexibility and resilience in navigating market challenges.
CEO Succession Plan
A significant leadership transition is underway, with Bruno Morand set to succeed Patrick Schorn as CEO effective September 1. Schorn will transition to the role of Executive Chairman, ensuring continuity in strategic direction.
Challenges in Mexico
The company faces delays in collections in Mexico, with outstanding receivables amounting to $60 million to $65 million. This presents a challenge that Borr Drilling will need to address to maintain its financial momentum.
Saudi Arabia Operational Uncertainty
Operational uncertainties in Saudi Arabia have pressured day rates. While there are positive signs, the lack of clear commitments poses a risk to the company’s operations in the region.
Increased Operating Expenses
Operating expenses increased by $14.4 million or 9% compared to the first quarter, primarily due to rig operating expenses. This rise in costs highlights the need for ongoing cost management efforts.
Cash Flow Impacted by Interest Payments
Cash flow from operations was impacted by $98.3 million in cash interest payments. This financial burden underscores the importance of managing debt and interest obligations effectively.
Forward-Looking Guidance
Looking ahead, Borr Drilling remains optimistic about its future performance. The company expects consistent third-quarter results and is on track with the Bloomberg consensus for 2025 adjusted EBITDA of $470 million. The Mexican government’s efforts to strengthen Pemex’s liquidity are anticipated to benefit Borr, positioning it to capitalize on increased drilling activity. Under the leadership of new CEO Bruno Morand, the company is poised to continue its strategic initiatives.
In summary, Borr Drilling’s earnings call reflects a company in a strong financial position with a positive outlook. Despite challenges in Mexico and Saudi Arabia, the company’s robust revenue growth, high utilization rates, and strategic contract acquisitions underscore its potential for continued success. The leadership transition and strengthened financial position further enhance Borr Drilling’s prospects in the competitive drilling market.